To fix this, the ways are :-
a. Do as the message says i.e. increase vmalloc size. The README contains more details about it.
b. Move to a 64-bit OS. This exhaustion issues are much less likely in a 64-bit OS as compared to a 32-bit one.

2. X failing to start when one of the GPUs fails initialization.
Internally NVIDIA filed Bug 740018 to track this issue.